Park View Oz Reit Inc · OTC:PVOZ
Park View Oz Reit — Investor Presentation (March 2022)
62 slides from Park View Oz Reit's investor presentation, March 2022
Slide 1: Opportunity Zone Tax Incentives with Park View OZ REIT
Opportunity Zone Tax Incentives with Park View OZ REIT MICHAEL KELLEY CEO - PARK VIEW OZ REIT (OTC:PVOZ) Park View OZ REIT’s SEC filings may be found at: EDGAR Search Results (sec.gov) 1
Slide 2: Disclosure
Disclosure This presentation is for discussion purposes only and does not constitute and should not be interpreted as either an investment recommendation or advice, including legal, tax or accounting advice. This presentation includes forward-looking statements that represent opinions, estimates and
Slide 3: Key Points
Key Points The greatest U.S. tax incentive ever? Roth-like tax-free compound growth until 2047 without income or annual contribution restrictions. Broadly applicable. Investors with recent capital gains are eligible.
Slide 4: Breaking Out the Bazooka
Breaking Out the Bazooka This program is many times bigger than previous community development efforts. - EIG originally estimated that there were 6 trillion dollars of capital gains liability owed by U.S. taxpayers (realized and unrealized.) - The US Treasury originally expected QOFs to draw about
Slide 5: What are Financial Professionals Saying?
What are Financial Professionals Saying? QOFs are a “hot topic” because of their generous tax incentives, positive social impact, and the potential for extension of the existing QOF legislation. However, the perception is that QOFs are applicable in only limited situations and accessible to a small
Slide 6: Wider Adoption - QOF Friction Points
Wider Adoption - QOF Friction Points 1) QOF Knowledge 2) Poor QOF accessibility 3) Locked-in “one size fits all” 10-year holding periods 6
Slide 7: Agenda
Agenda Qualified Opportunity Funds - How they work and the tax benefits. Broad Access - Park View OZ REIT “The Easy OZ.” Holding Period Control - QOF tax saving strategies. QOF and 1031 Exchanges – How they can complement each other and how to choose between them. 7
Slide 8: OZ Program Background
OZ Program Background “Investing in Opportunities Act” Enjoyed Bipartisan Support – Designed to encourage capital investment in low-income neighborhoods. Promoting economic equality. Originally championed by Sean Parker (Federal + NIIT + California) 20% + 3.8% + 13.3% = 37.1% = Warehoused Capital On
Slide 9: Tax Cuts and Jobs Act (TCJA)
Tax Cuts and Jobs Act (TCJA) Created two new tax incentives: Opportunity Zone (OZ) Incentives ◦ The potential for the deferral and potential elimination of capital gains Qualified Business Income (sec. 199A) ◦ The potential for a 20% reduction in income tax 9
Slide 10: QOF Benefits Illustration
QOF Benefits Illustration 1 Original Capital Until December 31st, Gain 2026 Tax Deferral 2 After a 10-Year Hold, 100% Tax QOF Capital Gain Expires in 2047 Elimination 10
Slide 11: How Will QOF Benefits Affect Returns?
How Will QOF Benefits Affect Returns? Many market pundits calculate the QOF benefits, on a 10-year hold, increase returns on an investment earning 7 or 8% by about 3% annually on an after-tax equivalent. This means your capital is returning roughly 40%* (3%/7.5%=40%) more on an after-tax basis year
Slide 12: Conforming States - Individual Income Tax
Source: Novogradac Conforming States Individual Income tax Only California, Massachusetts, Mississippi and North Carolina are OZ non- conforming. 12
Slide 13: Conforming States - Corporate Income
Source: Novogradac Conforming States Corporate Income 13
Slide 14: What is a Qualified Opportunity Fund (QOF)?
What is a Qualified Opportunity Fund (QOF)? QOFs are the entity through which the Internal Revenue Service oversees opportunity zone compliance. You must invest through a QOF to be eligible for opportunity zone tax incentives. QOFs must invest 90% of their assets in qualified opportunity zone proper
Slide 15: What is an Opportunity Zone?
What is an Opportunity Zone? OZs are census tracts that qualify as low-income communities. Census tracts are typically 2,000 to 8,000 in population. Across the country there are more that 8,764 opportunity zones. (Approximately 11% of the country’s census tracts) 16
Slide 16: Opportunity Zone Business Property (QOZBP)
Opportunity Zone Business Property (QOZBP) Must be tangible commercial property, such as real estate or equipment, acquired from an unrelated party that meet one of two criteria: • Original use: Not yet placed in service. or • Substantially improved: Improved by at least as much as the purchase pric
Slide 17: Who is Eligible for QOF Benefits?
Who is Eligible for QOF Benefits? Anyone with a realized capital gain owed to the IRS. • Foreign or domestic • Could be an individual, corporation, a REIT, trust or partnership Mixed assets - Only the capital gain investment qualifies for the tax benefits, but investing non-capital gains funds is al
Slide 18: What Capital is Eligible for QOF Benefits?
What Capital is Eligible for QOF Benefits? Almost any type of capital gain is eligible. ◦ Capital which was not at risk, does not qualify. Examples would be one half of an option straddle or carried interest. The capital gain (not including principal) must be reinvested in a QOF within 180 days. The
Slide 19: Installment Sales
180 Day Investment Period Installment Sales The capital gain proceeds for an installment sale are considered a new capital gain in the year they are received. The reinvestment period can start either when the payment is received or at year end. If you are receiving monthly installment payments, you
Slide 20: Partnerships
180 Day Investment Period Partnerships A partnership investor may choose to begin their 180-day investment period: ◦ On the date the partnership realizes the gain. ◦ At the partnership’s year end – Typically December 31st. ◦ When the partnership’s taxes are due without extensions – Typically March 1
Slide 21: 1231 Gain
180 Day Investment Period 1231 Gain 1231 gains and losses do not have to be netted. The investor can choose to begin the 180-day investment period starting: ◦ on the date of the inclusion event, ◦ at the taxable year-end of the entity or ◦ on the date the entities’ taxes are dues without extension.
Slide 22: RICs and REITs
180 Day Investment Period RICs and REITs The investor can choose to begin their investment period: ◦ When the capital gain is distributed. ◦ At the RIC or REIT’s financial year end. 23
Slide 23: Park View OZ REIT – Adding Value
Park View OZ REIT – Adding Value Deliver powerful QOF tax benefits in a structure that is accessible to all investors and enables a variety of tax-efficient strategies. Low fees Investment in CRE with strong long-term growth drivers. 25
Slide 24: Traditional QOFs - The A.I.V. Problem
Traditional QOFs - The A.I.V. Problem K-1 (partnership) tax forms are notoriously difficult. Partnership Minimums: Only recent capital gains get the benefits. Accreditation requirements. Illiquidity/Inflexibility – 10-year capital commitment periods followed by planned liquidation. 26
Slide 25: QOF Friction Points
QOF Friction Points Improve accessibility: Almost all QOFs are structured like commercial real estate partnerships. These vehicles do not appeal to most investors. Improve financial planning utility: For investors to maximize their QOF benefits it is important that they can choose a holding period t
Slide 26: Park View OZ REIT “The Easy OZ”
Park View OZ REIT “The Easy OZ” Solution: We are the only QOF with publicly traded shares of stock (OTC: PVOZ). Eliminate high investment minimums. Accreditation requirements do not apply. Swap complex K-1 tax forms for 1099-DIVs. You control the holding period.
Slide 27: History Repeats - REIT Background
History Repeats - REIT Background - 1960 sponsored by Senator John Kennedy and signed by President Eisenhower. - Commercial real estate created great wealth but only a small percentage of the investing public participated. - Essentially a tax-free corporation. 29
Slide 28: Example OZ Investment
Example OZ Investment 2209 N. Boulevard, Tampa Heights 30
Slide 29: Tampa Heights Armature Works / Riverwalk
Tampa Heights Armature Works / Riverwalk 31
Slide 30: Investment Strategy: Value Driven and Diversified
Investment Strategy: Value Driven and Diversified Good Investments that happen to be in Opportunity Zones Seek attractive returns while minimizing risk: 1) Valuation / Due Diligence. 2) Control Project Risk: Leverage, Permitting, Partnerships 3) Geographic and asset diversification. - Multi-family,
Slide 31: Positioned as a Preferred Partner
Positioned as a Preferred Partner Investment / Real Estate QOF Management Financial Advisor Development 33
Slide 32: Tax Benefits QOF/QBI
Tax realization on the original capital gain is deferred until the QOF is sold or December 31, 2026, whichever comes first. After 10 years, all capital gain tax Tax Benefits liability on the new OZ investment is QOF/QBI eliminated (the benefit lasts through 2047.) Stockholders are eligible to take a
Slide 33: REIT structure means stock ownership with no double taxation
REIT structure means stock ownership with no double taxation. Benefits No K-1 (or multiple K-1s) to wait Continued for: You will receive a 1099-DIV. Tradable shares give investors much better control of their investment period. 35
Slide 34: Keep Fees Low
No sales commission or investor service fees. Low 5% stock interest/profit interest Keep Fees Low (versus 20% traditionally.) 0.75% management fee (versus 2% traditionally.) 36
Slide 35: Transparency and a Low Investment Minimum
Public financial reports and SEC oversight give shareholders much greater financial Transparency transparency than private real estate funds. and a Low Investment Low investment minimum of one share on Minimum the open market or $10,000 per investor through the electronic subscription agreement. 37
Slide 36: Park View OZ REIT Service Providers
Park View OZ REIT Service Providers 38
Slide 37: A Chance to Address Clients’ Pain Points
A Chance to Address Clients’ Pain Points Money is emotional and taxes are even more so. Capital gains can tax can be uniquely frustrating. Getting taxed on government created inflation. Understanding QOF strategies can help set you apart from competitors. 40
Slide 38: Tax Solutions
Tax Solutions QOFs can be like a “Swiss Army Knife” for financial planning. Better control of tax liabilities. 41
Slide 39: Shifting the Realization Date
Shifting the Realization Date Short-term tax strategies The QOF Deferral benefit does not affect the character of the gain. The QOF deferral benefit moves the realization date. The order and timing of capital gains and losses can greatly affect after tax results. 42
Slide 40: Matching Future Losses with Current Gains
Tax Solutions Matching Future Losses with Current Gains Investors, especially those in volatile sectors, may want use a QOF to defer their capital gain realization date. If they then have a loss anytime during the deferral period, they can trigger a matching gain in the same tax year by selling the
Slide 41: Using QOFs to Match Gains and Losses
Using QOFs to Match Gains and Losses The order you pay gains and losses matters PAY AS YOU GO STRATEGY QOF DEFERRAL STRATEGY Current Year Future Year Current Year Future Year Gains $1,000,000 Gains $1,000,000 $1,000,000 QOF → Sell QOF Losses $1,000,000 Losses $1,000,000 20% Capital Taxes Owed Tax Lo
Slide 42: Selling a Business and Retiring
Tax Solutions Selling a Business and Retiring Selling a business and incurring a capital gain in a year that you are also still working may push much of your income into an elevated tax bracket. How can a QOF help? 45
Slide 43: Selling a Business and Retiring
Tax Solutions Selling a Business and Retiring If you sell the business, a QOF can defer the capital gain realization into future lower earning years. You can then sell some of the QOF each year to spread out your tax liability. Hopefully, enjoying the tax deferment and a lower tax rate. 46
Slide 44: 1231 Look Back Window
Tax Solutions 1231 Look Back Window 1231 assets get very generous tax treatment. A gain is taxed at capital gain rates, but 1231 losses are taken at ordinary income rates. However, if you have had a gain within 5 years of claiming a loss the higher income tax rate will apply. How could a QOF help? 4
Slide 45: 1231 Look Back Window
Tax Solutions 1231 Look Back Window A QOF could potentially defer a gain’s realization date beyond the five year look back. Example: A 1231 gain occurs 4 years after a loss. A QOF defer the realization date beyond the 5-year window saving 17% (income tax 37% minus capital gain 20% = 17%) 48
Slide 46: 1231 Asset 5 Year Look Back Period
1231 Asset 5 Year Look Back Period June of 2020 2021 2022 2023 2024 2025 Loss of Gain of Defer the Gain $1,000,000 $1,000,000 outside the 5 QOF → year look back Tax loss carry Income tax rate Capital gain tax forward at 37% 37% rate 20% tax rate Tax of $370,000 Tax of $200,000 $238,000 Lowering the
Slide 47: Elimination Benefit – Tax-Free Compound Growth
Tax Solutions Elimination Benefit – Tax-Free Compound Growth This is similar to a Roth IRA but without maximum contribution limits. QOFs give investors the potential to enjoy tax-free compound growth until the benefit expires in 2047. You want more TFCG in your financial life! 50
Slide 48: Tax-free compound growth is a great way to create wealth
Tax Savings Beyond 10 Years $500,000 Tax-free compound growth is a great way to create $450,000 wealth. $400,000 $350,000 $300,000 The tax savings beyond 10 years represents 85% of the $250,000 total. $200,000 $150,000 $100,000 This example shows a $100,000 dollar investment $50,000 growing at 15% a
Slide 49: Pairing IDGT with a QOF
Tax Solutions Pairing Intentionally Defective Grantor Trusts (IDGT) with a QOF A trust can be an effective way to remove highly appreciating assets from an estate subject to estate tax. Trusts can protect assets from lawsuits and other claims. Trust do not enjoy a step up in basis on death (Section
Slide 50: Collectibles
Tax Solutions Collectibles Gains from art, precious metals (even ETFs), and other collectibles pay an elevated marginal capital gain tax rate of 28%. - Since the TCJA are no longer eligible for a 1031 exchange. How can a QOF help? - Collectibles can defer capital gains with a QOF investment. 53
Slide 51: Making Cash QOF Eligible
Tax Solutions Making Cash QOF Eligible - QOFs have no cash tracing requirement. You can trigger an unrealized gain elsewhere in the portfolio and buy the asset back immediately. - The cash now is eligible for QOF benefits. - Wash sale rules do not apply on gain harvesting. - The asset now has a mark
Slide 52: 1031s aka: “Like Kind Exchange”
1031s aka: “Like Kind Exchange” Tax act of 2017 led to 1031s being restricted to real property. - Exchanges of machinery, equipment, vehicles, artwork, collectibles, patents, and other intellectual property and intangible business assets no longer qualify. Proceeds must be segregated - Typically, a
Slide 53: 1031 Exchange (continued)
1031 Exchange (continued) All proceeds must be reinvested to defer the entire capital gain liability. - Gain, principal, debt The tax deferral can be rolled over into new 1031 properties again and again. - The capital gain liability only becomes due once the cash is no longer invested in an eligible
Slide 54: QOF vs 1031: Which is Better for You?
Which is Better for You? Capital Gains from CRE Any Capital Gain is Eligible Requires Reinvest of All Proceeds Requires the Reinvestment of Gains Can Defer Tax Indefinitely Deferred Capital Gains Can Defer Tax Until December 31, 2026 Strict Cash Tracing 1031 Estate Planning QOF No Cash Tracing 45 Da
Slide 55: QOF Cost Basis and Debt Examples
QOF Cost Basis and Debt Examples HIGH DEBT, LOW-COST BASIS LOW DEBT, HIGH-COST BASIS $10 million Sale of Property $10 Million Sales of Property $5 Million in Debt No Debt Zero Cost Basis $9 Million Cost Basis The investor would need to invest The investor would only need to invest the entire $10 mil
Slide 56: How to Choose - 1031 or QOF?
How to Choose - 1031 or QOF? Low Debt QOF High 1031 Debt Low High Basis Basis
Slide 57: QOFs Can Help 1031 Investors
QOFs Can Help 1031 Investors Amount of less than 100K may be difficult to invest in a DST or 1031 partnership. QOFs can help partial 1031s (boot) by deferring remainder gains. QOF can help with failed 1031s: ◦ Failure to identify properties within 45 days ◦ Failure to close within 180 days ◦ Sale pr
Slide 58: QOFs Can Help 1031 Investors
QOFs Can Help 1031 Investors Qualified Intermediaries (QIs) give 1031 investors more options If a QI was hired to segregate the cash intended for a 1031 exchange and the exchange can not be completed, the funds may qualify for installment sale treatment. This can result in an inadvertent tax deferra
Slide 59: Key Points
Key Points ➢QOF incentives are broadly applicable. Almost all investors will have a capital gain over time. ➢QOF incentives can significantly increase after-tax returns. ➢Stock ownership greatly increases access to QOF incentives. ➢Control of the QOF holding period is key to maximizing QOF tax incen
Slide 60: Appendix: How to Claim Tax Incentives with the IRS
Appendix: How to Claim Tax Incentives with the IRS Use form 8949 on entry and exit of the QOF Use form 8997 annually while invested in the QOF For QBI deduction use form 8995 You will receive a 1099-DIV not a K-1 Here is a link to our QOF tax information page: https://parkviewozreit.com/qof-tax-form
Slide 61: Further Reading
Further Reading “How Collectors of Art Can Benefit from QOFs” CPA Journal, March 2019 by Sid Kess and Michael Kelley. “Preserving Generational Wealth” CPA Journal, January 2020 by Michael Kelley and Michael Gershon “New Qualified Opportunity Funds are Starting to Fulfill Their Promise” Thomson Reute
Slide 62: Contact Information
Contact Information Michael Kelley Park View OZ REIT One Beacon Street 32nd Floor Boston MA 02108 (617) 971-8807 mikefkelley@parkviewinv.com www.parkviewozreit.com Stock Trading Symbol: PVOZ 66
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